Insights

The Way is Clear for 100% Foreign Ownership of Companies in Bahrain

In an update to our “Business-Friendly Bahrain” article featured in last quarter’s Review, in light of further amendments to the rules regarding 100% foreign ownership of companies in Bahrain, we explore the recent amendments to the Commercial Companies Law as a result of Law No. 50/2014 and Law No. 28/2015. On 18 July 2016, the Government approved an amendment to the current companies legislation, which will pave the way for companies in a variety of sectors to be owned 100% by non-Bahraini nationals. The amendment was passed at the cabinet meeting on 18 July 2016 headed by His Royal Highness Prime Minister Prince Khalifa Al-Khalifa. The amendment will allow for 100% foreign ownership in the following sectors:

food;

administrative services;

arts;

entertainment and leisure;

health and social work;

information and communications;

manufacturing;

residency;

mining and quarrying;

water supply, and;

professional, scientific, technical and real estate activities.

It is anticipated that this change will move the Kingdom of Bahrain up the indices relating to the ease of starting a business enterprise. It will also attract international firms to set up a base in the country, providing them with access to the economies within the wider Gulf region, especially when the amendment is seen in conjunction with the fully operational Business Licensing Integrated System which automates business registration and the consolidation of the number of commercial activities available to newly incorporated businesses.

The changes to the Companies Law will also make it easier for closed joint stock companies to convert and offer their shares publicly by removing the previous three-year limit on them being able to do so, thereby easing restrictions on growing businesses.

By opening up certain sectors to foreign ownership, simplifying the process of setting up a business in Bahrain and making it easier for growing businesses to become public companies, it is likely that there will be a significant and positive long-term impact on the country’s economy. Such a move is seen as a sign that Bahrain plans to compete internationally with the free zones and enterprise hubs found in the wider region.

This amendment follows His Majesty King Hamad’s Royal Decree during the National Assembly’s recess last year to allow 100% foreign ownership of companies in the Kingdom of Bahrain. This decree was unanimously approved by the Shura Council in May 2016. Previously, 100% foreign ownership was restricted largely to companies in the technology and manufacturing sectors. Despite this, it was possible for the Minister of Industry and Commerce to grant exemptions where the Minister believed such investment would benefit the Kingdom and would further develop the country’s economy.

The decision is part of a rising trend amongst the countries in the wider Gulf region. In January, it was reported that Oman was to allow 100% foreign ownership and last month it was announced that Saudi Arabia would permit 100% foreign ownership in the retail sector.

This article was originally published by LexisNexis. For more information, please contact Rupert Copeman-Hill on +973 17 133211.

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